Auto Insurance Claims: Auto insurance claim, auto insurance claim, private contract

Question
My wife recently backed into another car only damaging the other cars grill.  They exchanged  contact and insurance information. She came home and let me know what happened. By the time my wife had returned home the driver of the other car had already called my insurance company to report a claim.  However, not knowing that at the time and having a little knowledge of what it would cost to repair I left a message with the other driver asking them to contact me and I would take care of the damage with cash at a repair shop of her choice instead of filing a claim as I knew the rate would go up.  However, when I contacted my insurance company they stated that since the claim had already been made, it could not be recalled and our rate would go up anyway even if we paid for the damages out of pocket.  The driver of the other car will agree to let me pay for the repair and cancel the claim if I thought it would not continue to effect my insurance rate.  According to my insurance reresentative, my rate will go up about 900 dollars annually and will not be taken off the driving record for 3 years.  The grill repair cost will be 871.00.  Over a period of 3 years that grill repair expense will be in excess of 2,700 dollars.

Is it legal for an insurance company to go ahead and record a claim so they can increase premeiums, if it is being recalled or terminated?  Please address this question asap as it is could be a matter of 1,800 in additional expense over the long haul.  
By the way I live in Texas as various states have different laws and regs.

Thank You!  

Answer
I believe that the insurance company can basically raise your premium whenever they feel like their risk in insuring you has increased.  It's a private contract that you enter into with them and it's based on their assessment of the level of risk you represent.

In your situation, I might consider switching insurance companies immediately and locking in a lower premium with another carrier.

I wish I had better news for you but they are the 900 pound gorilla and they throw their weight around quite a bit.

Best of luck,

Ernest Ferraro